Do We Suck at Personal Finance Because We Suck At Math?

“Well, there is no use studying math, you’re either good at it or you’re not.”

“When will I ever use this in the real world anyway?”

As a high school teacher I hear complaints about math constantly (well… I just hear many complaints period). There is this widespread general attitude towards numeracy and math as if it were some kind of magic that a few chosen practitioners can wield, while the rest of us commoners are left helpless in the dark. This is logically ridiculous, but that makes it no less a constructed reality. The sad fact is that many of us – probably a solid majority – do everything we can to stay away from math after we leave the public school system.

According to the PISA test (the most widely used international standard – and a really good baseline) Canadians aren’t that good at math to start with (depending on how you read the statistics – we’re better than the OECD average, but roughly two years of education behind Shanghai) – and we’re getting worse. When you factor in how little most of us engage with math after high school I highly doubt many of us get more comfortable with the subject.

A High Correlation Between Knowing Percentages and Understanding Interest Rates…

Interesting enough, I might be the exception to the rule. I graduated from a small school and didn’t have many comparison points with which to rank myself. My good friend was a math wizard and since graduating he has finished an engineering degree at an advanced rate while being covered under an all-expenses-paid scholarship in Europe. Compared to him I knew I wasn’t a “math person”. I didn’t intuitively engage with more abstract calculus-related concepts very easily. I did well enough with some good teaching, my friend’s help, and a lot of extra homework, but I knew I didn’t want to depend on math skills the rest of my life.

In university I got my first taste of the mainstream attitudes towards math. Because I was relatively weak in math and didn’t have a passion for it, I enrolled in a course called “Topics in Math”. Essentially it was a math course designed to get humanities majors their math and sciences requirement for their undergrad degree. I hoped that it would be relatively painless and that I could get through without harming my GPA too badly – I wasn’t a “math guy” after all.

What I was exposed to on Wednesday nights that year was absolutely astounding. Here were students that had gotten into university, who literally could not begin to grasp math I had learned in grade 9. It turns out I was a math all-star and had just never noticed it ;). In all seriousness I couldn’t believe how many people could not do basic stuff with fractions, percentages, basic trigonometry, and beginner algebra. Even stuff like measurement appeared to draw blank stares. Three years later I would see many of these same attitudes in a place that should be very worrisome for the rest of society: in faculties of education.

Don't Hate The Mathematician – Or The Game

As I began to delve deeper into this whole personal finance thing I realized that it wasn’t just people in easy-credit math courses and faculties of education that hated and feared math – it was people in general. Intimidated by and/or dislike are not strong enough words to describe the relationship many (most?) Canadians have with basic math. Once again, I need to clarify. This isn’t like the techie at Future Shop calling you dumb for not knowing something they find straight forward in regards to the latest gadget.

I have no inclination to go into engineering or any career that would depend on my mathematical abilities. On my best days I can follow the math that guys like Nate Silver put out there, but would never think to do any analysis like that myself. I’m talking from the perspective of someone who is confident in their practical math and numeracy skills. The literacy-based comparison would be the idea that I like reading the newspaper and I’m good at it, but I wouldn’t touch writing a book or reading a thick novel.

Is A Lack of Math Knowledge Hurting You?

So, back to the original question – how does this math deficit impact our personal finance actions? Not having math as a large part of your identity is ok. Leaving high school without a clear understanding of grade nine math principles is not. Thus we identify one of the great myths of the financial industry and money gurus everywhere – the math we need for personal finance really isn’t that hard. Heck, budgeting is basically grade 3-6 math concepts and most of us are still trying to wrap our arms around that.

Most people could get by using passive investing methods which consist mainly of understanding basically percentages – in other words grade 8-9 math. If you want to get somewhat complicated as a retail investor and look at ratios like P/E or something similar – those are basic fractions. From what I can tell, success for 99.999% of retail investors could be achieved by using gr.10-11 math. There isn’t anything there that is as hard as quadratic equations or advanced algebra!

The problem is not the actual math itself – although many of us didn’t really learn that subject area all that well. The problem is the fear of engaging with the issue at all. If you told most people, “Ok, when we talk about how much a company is worth, we like to compare the current price tag on the company with how much money they made the year before. In order to do that we invented a statistic called the price-to-earnings ratio. All it is a basic fraction. We take the price of the stock (how much the company is worth) and divide it by how much money the company made.

This is one way to tell if we think it is a good idea to buy a part of the company or not.” I like to think most people would understand that, but as soon as you show something like: APPL P/E 13.44, then people get all flustered. It seems that Canadians have an inherent fear of basic math problem-solving and I’m not sure where it starts. Maybe it’s something we pass down from parent to child, maybe it’s the fact we severely lack good math teachers – especially at the primary level – in our public school system? I’m not sure, but the fear is definitely there for many of us.

Hard To Intelligently Invest With a Math Deficit

I believe that because we are afraid of math, the behavioral handicaps that we as humans have (see here for details) become that much harder to overcome. If you can’t understand the basic math behind index investing or the futility of trying to pick mutual funds, then why would you be swayed by logic in any direction?

Instead it’s by far the path of least resistance to listen to whatever someone sitting in front of you in a semi-expensive suit and tie is saying. It’s much easier to just make minimum payments on your credit cards because that number is in large print on the top part of the statement and will cause you the least immediate pain/sacrifice. Don’t think about the long-term interest you’re paying because there is no way that will lead to instant gratification and it will force you to confront something you’re not comfortable with – grade 9 math.

Kyle is a high school humanities teacher by day, and freelance personal finance author by night. He has been published in academic journals, and has also co-authored the book "More Money for Beer and Textbooks". In his free time Kyle likes to limp up and down a basketball court and pretend to be a tough guy in a boxing ring.

13 Comments

Lareon April 14, 2014 at 2:08 am

As someone who’s failed grade 8 math and ended up taking the easy math courses (essentials and applications) throughout high school, I can say that if something I’m truly interested in requires math, then I’ll gladly take the time to learn it myself, albeit with some hesitation at first.

I think many people, including myself, don’t like math because in school it always started and ended with, “Okay, we’re going to learn this math today with all these formulas that you’re going to have to memorize. Get your pens, papers, and calculators ready.”
There’s hardly any attempt to relate all these numbers with a real life situation. Of course there’s word problems in textbooks, but in my opinion those do a poor job at illustrating what complex math can do and are only good for serving the purpose of being put into a textbook and worked on.
I also find that internet resources are better at teaching than a classroom teacher, but that’s probably just me (I like going at my own pace).

For me Math is very important in dealing with our daily lives. My cousin who just started to go to a training really has a problem in dealing with Math, like computation and conversion. He told me, if he just seriously studies his Math subject before then surely, he don’t have any problem now.

Philon April 14, 2014 at 12:13 pm

Great topic. I struggled with math when teachers or the system had us memorize math tables and formula. It took one cool teacher that took everyday problems and explained how math could solve the problem to get me and arguably most of the class I was in at the time to understand that math was just part of the process of solving a problems. How many tiles on the class room floor… Now if we wanted to tile the gym floor, how could we use what we know about the classroom floor to help us solve the problem? How about if we wanted cover the classroom floor with 8x LEGO bricks? how many would it take? math cannot be taught at face value, but needs to be put into context, and until teachers/instructors take the time to provide examples of math in the students everyday life, we will repeat this ugly cycle. for the record, I nearly failed math each year up to grade 7, and then pow, one great teacher I connected with and I and several of my classmates went on to be science and engineering geeks. For the record, I went on to be a Professional Engineer, with background in Quality and Reliability. funny how a kid who struggled with math up until Jr. high, managed to become a “math wizard”.
Again, find a reason to need math, and it becomes easy to learn… – Cheers

I don’t like the way they are teaching my kids math (in Ontario.) They decided that rote work and memorizing didn’t help hands-on and experimental learners. So now most of the teaching they’ve been receiving has been experimental: to the point where no one ever summarized and showed them the basic formulas for areas and volumes. Since one of my kids is the kind who learns best by memorizing formulas and practicing them to the point of death by boredom, it’s been a problem.

What I’d like to see is a curriculum that teaches math BOTH ways. It’s great to offer experimentation for those who learn best that way. But it would also be great to offer formulas and drills for those who learn best that way.

As for personal finances, if you keep an eye on sites like redflagdeals you will find a staggering number of people who think that if a bank promotion offers 2.5% interest for a 3-month period, they think they will get 2.5% at the end of the three months. Their eyes skip right over the word “annual” in the ads. I’m not sure how to combat that, but I am sure the banks running the ads are well aware of the fact many people will misunderstand!

You are hitting on one of the many great debates happening within our school system right now Bet. Google “Alberta math protest” and you’ll find exactly the same situation. Here in Manitoba it has reached such a state of affairs that we have university math professors criticizing education professors for backing insane policies. I can tell you without a shred of exaggeration that I am amazed every day at what bandwagons gain traction in the world of education and I think you have a really good argument.

A few concerned souls are trying to teach this stuff in schools, but we’re not getting a lot of support from admin. Many people believe that we should be “layering in” PF stuff throughout curricula and I just don’t think that’s going to work at all.

Interesting experience Phillip. We are trying to do more of this in the public system, but the execution of it is questionable at best. I often find that when I teach things like interest rates and return on investment more kids are able to engage than when it is just an abstract concept. Many math teachers seem to love the idea that their subject area is somehow separate from everything else and is more “pure”. I’ll never understand it personally.

Thanks Kyle! Great article here. It is amazing how much math we all must use on a daily basis…and I agree…it certainly does help us track and master our daily finances! How do you get someone to get over his fear of math, and thus, fear of attacking his or her personal finances?

I’m not sure Wes. It seems much easier to try and help people when they are young. The fear becomes incredibly strong by the time I see them in grade 7,8,9.

Edwardfon April 22, 2014 at 11:18 am

This will sound arrogant, but I’ve been observing it for a long time and I don’t think the majority of people financially understand anything over $7,000. Once you’re past that number it all becomes a fog. They understand that a $3,000 vacation is extremely expensive, but when purchasing an SUV they can easily be upsold from $39,000 to $55,000. The fact that it’s $16,000 difference, a 41% increase, (and the amount of work time required to earn/save/repay that much) just doesn’t register at all. We have these crazy bidding wars for homes in Canada sometimes and a house will go for $120,000 over asking price. This from middle-income families. It doesn’t seem to register how large a sum that actually is. …And how long it takes to earn that sort of money. I’m not sure that better math skills can change the way people envision large sums (they can’t). The probability of winning the big lottery jackpot is 1 in 13,983,816. 14 million alone should tell you this is completely impossible odds. 14 million of anything blows my mind. If folks could actually see what that number looks like, or have to sit down and count that high, they’d never ever buy a lottery ticket again.
Anyway, great article! …And keep an eye out for my personal $7,000 dissonance threshold theory.

That is pretty damn brilliant Edward. I think your theory is bang on and will probably be even more widespread due to a generation raised on near-nil interest rates. I might put it at a 7-15K range, but your absolutely correct. In fact, if you don’t mind perhaps I’ll add that thesis to my article queue?

Danielon May 20, 2018 at 12:34 am

Interesting post Kyle. However, I strongly disagree with your generalization that “Canadians aren’t that good at math to start with.” As a high school teacher for over 20 years (5 years in Canada, 16 and counting overseas), and looking closely at the PISA stats, I would state the opposite. As-is, Canada’s among the best in the world, removing the oddly reported data points from Singapore, B-S-J-G, Hong Kong, and Macao. These are for all intents and purposes cities full of the economic, political and cultural elite in their respective countries, and not a fair representation of an apples-to-apples comparison among nations. I would also recommend that you dig into this (www.oecd.org/pisa/…282-en.htm) a bit deeper. It is more relevant to your article and indicates (for 15 year olds at least) that our financial literacy is even better than our math in comparison to the countries/cities tested (which did not include dozens of the undeveloped and developing countries). Math issues in Canada as an excuse for/contributor to financial irresponsibility doesn’t “add up” from this standpoint.

Owen @ PlanEasy.caon May 28, 2018 at 8:06 am

Being bad at math seems to be a long standing pop culture joke, it’s almost a badge of honor to say “I’m bad at math”. That line of thinking just gets passed down from parents to children. I even notice it with my own children and they’re only 4 and 2. Sometimes other adults make those comments without even realizing it and kids seem to pick up on everything.

As a math guy you’ll be familiar with the quote that, “There are three kinds of lies: lies, damned lies, and statistics.”

This is pretty much where I fall on your evidence. I’m quite familiar with the PISA scores and don’t dispute that we’re “amongst the best in the world” when it comes to broad-based public education in math. I just don’t think that means we’re all that good – more that we’re all pretty bad aside from pockets of “elites” that you mention. The same goes for financial literacy. Every survey that comes out (www.lowestrates.ca/blog/…-knowledge) shows me pretty thoroughly that people have little-to-no idea what they’re talking about generally speaking. Here’s basically how I see our education right now: educhatter.wordpress.com/2016/…rformance/. I’m curious Daniel – have you taken some of the PISA test sample questions? I did after reading “The Smartest Kids in the World” and delving into the issue a bit, and I was shocked at how easy the questions were relatively speaking. Now obviously when I took it as a 27-year-old it should be pretty straightforward for me, but I think we might be seriously overestimating just what level of knowledge it takes to get a “good” score.

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